1:10 Split, 3 Bonuses, 29 Dividends Since Listing: FMCG Giant ITC At New High, 11.5% Up YTD; Next Big Target?

FMCG giant ITC witnessed a stellar week from September 23 to 27, with back-to-back new record highs, taking its weekly gains by 1.5%. ITC has turned around its performance on stock exchanges after no change in the tobacco segment during the Union Budget. This came as a positive and since then ITC which was in red before July, has now given double-digit returns. ITC shares are up by 11.5% year-to-date, most gains came during Q3 of 2024.

ITC Share Price:

Last week, on Friday, ITC stock ended at Rs 522.75 apiece, with a market cap of Rs 6,53,834.72 crore. During the trading session of September 27, ITC touched an all-time high of Rs 528.55 apiece and m-cap crossed over Rs 6.5 lakh crore for the first time as well.

ITC's share price ended the trading week from September 23-27, in green with a 1.5% upside. While its peers like Hindustan Unilever (HUL) witnessed a weekly decline of 1%, and so was the case with Godrej Consumer and Dabur India whose weekly performances are down by nearly 5% each.

Data from BSE showed that ITC's price-to-equity ratio is at 31.93x, while the price-to-book ratio is at 9.03x. Also, its return on equity surged by 28.29%, which is strong.

In a year, ITC stock is up by nearly 18%. While the stock emerged as a multibagger with its 5-year performance being in gains of 107% on BSE.

ITC Corporate Actions:

ITC has rewarded investors with bonus issues, stock splits and dividends over the years since its listing.

Dividends: As per Trendlyne data, ITC has delivered up to 29 dividends since July 2001. In the last 12 months, the dividend payout is Rs 13.75 per share. While its dividend yield is of 2.63%.

Stock Split: The FMCG giant has carried only one stock split in the ratio of 1:10. The stock split led to its face value of Rs 10 each to be trimmed to Rs 1 each since September 28, 2005.

Bonus Issues: So far, ITC has given 3 bonuses. The last bonus was of 1:2 ratio in July 2016, while ITC has delivered 1:1 and 1:2 bonus ratios in August 2010 and September 2005. ITC has overall delivered 3 bonus shares.

ITC Share Price Recommendation:

Brokerage Antique Stock Broking has recommended BUY on ITC for a target price of Rs 553. While Motilal Oswal has recommended BUY with a massive target of Rs 575 on ITC.

Earlier, Motilal Oswal stated that ITC's core businesses of cigarettes and FMCG are witnessing steady growth. FMCG continues to enjoy industry-leading growth over peers due to ITC's category presence (large unorganized mix, under-penetrated, etc.). Consistent margin improvement further provides confidence in growth without compromising profitability.

Also, after the demerger of its asset-heavy hotel business, ITC's return profile will also improve. Margin improvements in the other FMCG business will further enhance return ratios and valuation multiples, it said.

ITC is set to demerge its hotel business which will be in the ratio of 1:10. Because as part of the merger process, for every (Ten) Ordinary Share of the face and paid-up value of Re. 1 each held in ITC, 1 (One) equity share of the face and paid-up value of Re. 1 in ITC Hotels. After the completion, ITC's stake will be reduced. The shareholders of ITC will hold about 60% of ITC Hotels directly, which is proportionate to their shareholding in ITC. The balance stake of about 40% will be held by ITC.